Bi-weekly headline CPI for the second half of March was 0.21%, in line with Bloomberg’s market consensus and our forecast. Core inflation came in at 0.18%, close to expectations (market at 0.19% and our forecast at 0.15%). Within the core component, tradable prices were up 0.18% 2w/2w, from 0.15% in the previous fortnight. Service prices rose 0.18% 2w/2w, slightly lower than the previous data at 0.22%, with some pressure in other services and housing. The non-core component increased by 0.34% 2w/2w due to pressures in agricultural prices for items such as green tomatoes, avocados, and lemons. Energy prices decreased during the fortnight (-0.36%), following a notable contraction in the previous reading(-0.71%).
In annual terms, headline inflation accelerated to 3.93%, from 3.67% in the first half of March. Core CPI also increased, rising from 3.56% in the previous month to 3.72% now, with merchandise at 3.04% (up from 2.92%) and services at 4.45% (up from 4.25%). In the February 6th statement, Banxico forecasted 3.7% for headline inflation and 3.6% for core inflation during 1Q25, aligning with the data published today.
Our take: Today’s report reinforces our view that the disinflationary trend continues, supported by low agricultural prices and a slowdown in economic activity. However, the inflation outlook remains challenging, with some peso depreciation, volatile climate conditions—including droughts in some parts of the country—and a still tight labor market posing risks. We forecast the CPI to end 2025 at 3.9%. Regarding the policy rate, we maintain our call for a 50-bps rate cut on May 15, down to 8.5%.
